EVs Coast Through 2014, Pin Hopes on 2015

Julia Pyper is a Senior Editor at Greentech Media covering clean energy policy, the solar industry, grid edge technologies and electric mobility. She previously reported for E&E Publishing, and has covered clean energy and climate change issues across the U.S. and abroad, including in Haiti, Israel and the Maldives. Julia holds degrees from McGill and Columbia Universities. Find her on Twitter @JMPyper.

This year is shaping up to be a good, but not great year for plug-in cars.

Electric vehicle (EV) sales are up, from 86,912 units over the first eleven months of 2013 to 107,487 units over the same period of 2014 -- a 24 percent increase. Still, EVs haven't given gasoline cars much competition. Total EV sales represent 0.7 percent of the new vehicle market so far this year, up only a touch from 0.6 percent in 2013 and 0.4 percent in 2012, according to the Energy Information Administration.

Sales were likely moderated by tumbling gasoline prices, which recently reached their lowest point in more than five years. Cheap gasoline undermines the value proposition of driving on low-cost electricity, and, apparently, reignites demand for SUVs.

Underwhelming EV growth could also mean the technology simply isn’t winning over consumers as some hoped.

Several automakers, interest groups and industry experts aren't losing heart yet, though. In a recent note to investors, Deutsche Bank analyst Rod Lache said he expects EVs to become increasingly competitive as battery costs continue to fall and conventional gasoline-powered cars become more expensive in order to comply with federally mandated fuel economy standards. If EVs reach cost parity, it could “serve as a catalyst for significant expansion,” according to Lache.

A number of new battery electric and plug-in hybrid vehicles came to market this year, ranging from commuters to sports cars, including the Chevrolet Spark EV, the Cadillac ELR, the BMW i3 Coupe, BMW i8 and the Porsche Panamera E-Hybrid. Theoretically, more vehicles should help to boost scale and reduce technology costs. Consumer choice has been limited, however; while there were eighteen EV models on the market this year, six models made up 90 percent of total EV sales.

Pure electrics gained ground in 2014, lead by the Nissan Leaf. The Chevrolet Volt hasn't fared quite as well. Sales of the plug-in hybrid are down 16.4 percent from January through November 2014 compared to the same eleven-month period last year. The slump could be because consumers are holding off purchases until the next-generation Volt hits the market in January. Both Nissan and General Motors have slashed prices to attract buyers.

Tesla Motors, meanwhile, can hardly keep up with demand for the Model S. Tesla did not begin deliveries on the Model X SUV this year, as previously expected. But it did launch the Model D, an upgraded version of the Model S with all-wheel drive and semi-autonomous features.

Without a doubt the biggest Tesla news of 2014 was the $5 billion Giga factory, a massive facility targeted to produce 500,000 lithium-ion batteries by 2020. The plant, now under construction in Nevada, will serve both mobile and stationary energy storage markets.

Volkswagen, the world’s second-largest automaker, also got into the battery game this year by purchasing a stake in QuantumScape Corp. The startup's solid-state battery technology is fireproof and could triple the range of Volkswagen’s current EVs. Volkswagen recently released its first all-electric vehicle, the E-Golf, which has a 93-mile range.

Final 2014 sales figures are expected the first week of January.

EVs get closer with the grid

Growth for EV makers means growth for utilities. A 2014 report by the Edison Electric Institute (EEI), the power industry’s main trade group, found that electric vehicles represent an enormous opportunity to boost demand against a backdrop of slowing growth in retail electricity sales.

EEI called on its member utilities to dedicate 5 percent of their annual fleet purchases to plug-in vehicles. The report also noted that customers view their utility as a trusted source of information on EVs, making them a key ally in growing the EV market.

There have been several research and development efforts this year to boost EV adoption by facilitating vehicle integration with the grid. For instance, the Electric Power Research Institute, eight automakers and fifteen utilities partnered up this year to develop an open platform for EVs to communicate with the grid regardless of location.

General Electric, Con Edison and researchers from Columbia University’s Center for Computational Learning also teamed up this year to research how artificial intelligence can help to run EV chargers in New York City buildings without incurring steep electric demand charges. And the Air Force tested a suite of new products enabling two-way power flow between EVs and the grid.

In California, where cumulative EV sales exceeded 100,000 units in August, utilities are helping to support the market by building out charging stations. Notably, Southern California Edison recently submitted an application to the CPUC to develop up to 30,000 EV charging stations in the coming years at a price tag of $350 million. According to Tam Hunt, head of Community Renewable Solutions, these efforts are likely to create new business opportunities and make EVs more cost-effective.

Figure 1: Monthly U.S. EV Sales, Dec. 2011-Nov. 2014

Too early to ditch incentives

Looking ahead to 2015, the EV market can expect to benefit from more charging stations, battery cost drops and new products. Audi, for instance, announced in November that it will launch a 280-mile, all-electric family car in 2017 that’s expected to rival the Model S.

Oil prices are a wild card, though. And so are incentives, which are badly needed for EV sales to pick up speed next year.

In Washington state, where battery electric vehicles (but not plug-in hybrids) are exempted from the state's 6.5 percent sales tax and there's been a concerted effort to build charging stations, EV adoption is the second highest in the country. Sales also grew this year in Georgia, which offers a zero-emissions vehicle tax credit of 20 percent of the the vehicle cost, up to $5,000.

Georgia Power said it will launch a $12 million pilot program to boost the number of EVs in the state through incentives for residential chargers and special electricity rates for EV customers, and it plans to install 50 public charging stations before the end of 2016. EV sales in the Peach State edged out California and Washington as a portion of overall vehicle sales this year. Atlanta is currently the No. 2 market in the country for EV adoption and the No. 1 market for the Nissan Leaf.

According to Nick Nigro, senior manager of transportation initiatives at the Center for Climate and Energy Solutions, Washington and Georgia will be two of the key battlegrounds for state EV policy in 2015. Washington's sales tax exemption is set to expire this July. In Georgia, utilities and EV advocates defeated attempts to roll back EV incentives this year, but lawmakers have indicated they want to revisit the issue next session.

“The all-electric incentives in these states will go under the microscope and likely be reformed in some way,” Nigro told Greentech Media. “Eliminating the incentives entirely would definitely hurt sales at a critical time for the EV market.”

Some argue that adding surcharges to EVs could also hurt sales. Several states have already added fees on EVs and hybrids so that drivers of fuel-efficient vehicles pay their fair share for road maintenance, which is normally funded by taxes on gasoline purchases.

Keep an eye on the uptake of fuel-cell electric vehicles in 2015, which could start to steal market share away from traditional EVs. This year, Hyundai launched the Tucson Fuel Cell and Toyota launched the Mirai. Honda is expected to launch its fuel-cell vehicle in 2015, and other automakers have said they're aiming for the 2017 timeframe. Fuel cell vehicles have the benefits of long range and quick refueling, but there are still questions about hydrogen infrastructure and consumer adoption of these vehicles.